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tv   Capitol Hill Hearings  CSPAN  January 9, 2013 1:00am-6:00am EST

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from finished. but rebuilding the homes and infrastructure damage destroyed by sandy is the next big challenge, and it will take make no mistake, our work is far from finished. rebuilding the homes and infrastructure damaged and destroyed by sandy is the next big challenge, and it will take years. we will need to spend our funds wisely and efficiently. we will need to cooperate. we will need to learn the lessons from past disasters and listen to each other. the good news is that strong leadership and bipartisan cooperation makes all these things possible. our work over the last three years proves that beyond argument. having worked hard to tackle our most urgent legacy problems, having faced up to and corrected some poor decisions from the past, we now have more freedom to chart a course of excellence in the future.
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as we begin this new legislative year, we can now look ahead from sandy, ahead from the national recession, to a brighter day for new jersey. the author bern williams once said, "man never made any material as resilient as the human spirit." for all i have seen and experienced as your governor in this extraordinary year, one experience will be indelibly etched in my memory. her name is ginjer. as i walked around the parking lot of the fire department in port monmouth in one of the days soon after sandy had laid waste to so much of our state, i saw so many of the scenes that i had come to expect in the aftermath of the storm -- neighbors helping neighbors, food being prepared for the hungry, first responders helping the homeless. then i met 9-year-old ginjer. having a 9-year-old girl myself, her height and manner
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of speaking was immediately familiar and evocative. having confronted so many crying adults at that point i felt ready to deal with anything. then ginjer looked at me, began to cry and told me she was scared. she told me she had lost everything -- she had lost her home and her belongings. she asked me to help her. as my eyes filled with tears, i took a deep breath and thought about what i would say to my bridget if she said the same thing to me, if she had the same look on her face, if she had the same tears in her eyes. i asked her where her mom was and she pointed right behind her. i asked her if her dad was ok.
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she told me he was. so i told ginjer, you haven't lost your home, you've just lost a house, a house we can replace. your home is with your mom and dad. i hugged her and told her not to cry, that the adults are in charge now and there was nothing to be afraid of anymore. ginjer is here today -- we've kept in touch -- and i want to thank her for giving voice to new jersey's children during sandy and helping to create a memory of humanity in a sea of despair. you are a special little girl.
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thank you for coming today. [applause] in this year ahead, let us prove the truth of the words i spoke to ginjer that day. let's put aside destructive politics in an election year. let's put aside accusations and false charges for purely political advantage. let's work together to honor the memories of those lost in sandy. let's put the needs of our most victimized citizens ahead of the partisan politics of the day.
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let's demonstrate once again the resilience of new jersey's spirit. and let us continue what we have started -- rebuilding from sandy with pride and determination; restoring our economy to growth and prosperity after a decade of decline and high taxes, and reclaiming the promise of new jersey for future generations, presenting to our children renewed excellence in our schools, a sound and balanced budget, and a vibrant economy with jobs for those willing to work hard. that is our mission -- to hurdle barriers no matter how high, to fight the elements of doubt or disaster, and to leave this place better than we found it. let us prove, once and for all, that what i said to ginjer is undeniably true -- the adults are in charge.
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let's accomplish the mission of rebuilding our battered state and restoring the hope and the faith and the trust of our people that government can work in a bipartisan way to restore our great way of life to all new jerseyans. in the year ahead, i look forward to working with all of you on that most important mission of all. thank you, god bless you, and god bless the great state of new jersey. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013]
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>> governor chris christie saying that new jersey has waited seven times longer for aid than the victims of hurricane katrina. last week, the house did approve $9.70 million in flood insurance, and republican leaders have said they will debate an additional $51 million next week, on january 15. you can see live house coverage here on c-span.
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on july 20, 1969, buzz aldrin became the second astronaut to walk on the surface of the moon. he spoke at an event in california last month about the future of space exploration. that is next on c-span. then, a hearing on nasa's budget and mission. now, remarks from u.s. astronaut buzz aldrin on the future of space exploration and travel. this event was hosted by the world affairs council of orange county, california. >> please welcome buzz aldrin. [applause] >> thank you. thank you. >> i come out punching. >> that is right. thank you for coming out here.
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the crowd is happy to be here. a living legend, really. what was your first recollection as a little kid that made you say, i want to go up there? >> let me get to that question. how many veterans are there in the crowd? [applause] i do not know how many of you know this, but i gave a hand salute to the pledge of allegiance, which is now authorized and not mandated by the congress, to help veterans identify each other in a crowd for the star-spangled banner and the pledge of allegiance. it troubles me that so very few
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avail themselves of this privilege. it was a privilege and an honor to serve my country. that is what has guided me through the rest of my life. my answers are usually damn long, so maybe you can help. what was the first question? [laughter] >> we are going to midnight. >> ok. >> what was your first recollection when you decided to go up to space? >> the first time i read flash gordon. i knew that was something where they went above the earth somehow. there goes the long answer. >> did you ever realize that could happen?
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at that time it was just sci-fi and then it did happen. >> i thought that i was a person looking off into the future, but really it was the quarterback of notre dame that inspired me. as a young kid -- i had my first airplane ride at the age of 2. symbolically, it was a plane piloted by my father. single engine and painted to look like an eagle. the eagle is a symbol of our nation. eagle was the name of our spacecraft that we landed on the moon. that did not motivate me to think about going into space.
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i got sick, as i recall, during that 2-year-old flight to miami. my sister had never had a flight, so on my second flight i took my sister. an amphibian was questioned with a picture in our basement of amelia earhart. >> what did your father do? >> he was a military person. he attended clark university. his physics professor was robert.
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i did not think too much of that. robert needed funding later on. my father knew guggenheim had a lot of money, but he knew that guggenheim did not know eddie. so eddie went to talk to charles lindbergh and guggenheim did know who charles lindbergh was. so he got some of the funding to do that. later, my father, because of his degree, was the head of air core engineering school. that later became brightfield airspace.
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engineering school became the school of technology. they financed my doctor's degree. >> good dna. good bloodline. military career and the segue to nasa. talk about how you morphed into getting into nasa. we will of course get to apollo 11. >> there was a west point friend of mine. he was one year behind me. ed white -- he was quite instrumental in my getting into the space program. we were in the same squadron in germany. we rotated back a lot earlier.
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life magazine came out and showed pictures of these capsules that were part of the mercury program. it said that the astronauts who were going to be selected are all going to be graduates of pilot schools. that would have been a good thing. that was my career to look over airplanes and judge airplanes that are current and will be flown by our people. i had my eyes a good bit beyond that. before i went there, i was always looking ahead into the future. i went to mit.
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i communicated with ed white after i made the smartest decision of my life, which was to take what i knew how to do, which is intercept airplanes in the air and decide that this is -- 1960 -- that one of these days, nobody had put anyone in orbit yet, but one of these days, we are going to need to join up with somebody who is in orbit in space and we will have to close and rendezvous with them. pursuing that has had a tremendous influence on my life up to now. it was an extremely wise decision to become an enhanced type of rendezvous person with a background at mit, which is usually pretty nerdy. we had computers then, but we also had candy machines.
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-- adding machines. >> was anyone brave enough to call you a nerd back then? >> they would have called me that probably. ed white went to michigan. we were writing. i'm not much of a writer. i have a few books out there. ed said, i have been to test pilot school. i have tested aircraft. nasa in 1960 came out and said they need to get more astronauts. he says, i will apply for the program.
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i came in touch with him and said, you will apply and i will apply. i did. he was selected and i was not. i had not had test pilot training. next year, guess what? >> you made the cut? >> they changed the requirement. more flying and less academic. being at the right place at the right time is clearly key to everything i have done in life. i have been fortunate to be able to -- most of the time -- take advantage of it. >> we advance the story to 1969, july. there were reports of how you were frustrated.
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is that overhyped? or were you really frustrated? >> that could be a long answer. >> that can be a long answer, but -- it may have been because he was closer to the door then i was. [laughter] [applause] however, he was clearly the commander and probably in my estimation the best test pilot that nasa ever put into the astronaut program. it does not stop there. he was an outstanding pilot and we sorely miss his observations. it is not easy to get
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observations out all the time, but when they did come out they were very well thought out. >> for just a second you did not think of pushing him aside and jumping out first -- that was not part of the plan? >> no, but remember, he said land a man on the moon and bring him back safely. it did not say anything about going out and walking around. that becomes outside the spacecraft. we did realize that we needed to learn how to be outside the spacecraft. leonov was the first person to go out. he had trouble getting back in -- he had to deflate his suit, his space suit, a little bit, so he could go back in again. then ed white was the first
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american to do that. he had a maneuvering the gun and he was pretty tall, and he had trouble closing the hatch. he did not want to get back in again. >> what is it like in that space craft? >> my point is that ed white was not the commander. the russians do it differently. every spacewalk we made in the gemini program was always made by the inferior person. when we went to apollo, the first space walk, they tested the lander in earth orbit. one of the things that may go wrong is when you have the spacecraft and go through the tunnel after you have been on the moon, it may be jammed. if it is jammed you have to depressurized, open the hatch in the lunar module, open the hatch in the command module, and
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go out and go into the command module. the command module pilot, not the commander, is standing in the hatch. the lunar module pilot is the one who walks. the commander stayed in there. there was good reason for that -- the amount of training that is taken by crewmembers, and if you think about it, the commander is in charge for liftoff -- every maneuver he has made except transposition and docking the command module -- someone else did that because that was his strength. everything that is done is really done by the commander with the assistance of the lunar module pilot. for the most part, experiments are then done by the junior
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member -- the co-pilot, but nasa does not like the word co- pilot. he become a commander or a pilot. there was every reason to think that early on in apollo we might land and put one person out to walk around and see if they can come back in again. >> what was it like? >> carrying on the tradition, it probably would have been the commander stayed in and the junior man went out. i think you are missing my point -- i hope these old people are not. [laughter] so now we come to the first landing. by that point it was clear we had the confidence and we would send to people out. there are two schools of thought -- who should it be? there was a school of thought it said the lunar module pilot ought to go out first -- others say, of course this is a momentous occasion and the
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commander clearly should go out first. that decision was made, and neil did that. until they made a decision it was delaying our training. once on the surface of the moon, the activities being done out there could have been controlled by the junior person to even out the training. neil is not someone who will let someone else do what he wants to do. he was a leader and i was a follower. controversy about this, these things, has to take into account that we are trying to develop a precedent of what is to be done in the future.
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clearly for me to have stood -- for neil to of stood in the window, looking out the window while i went down the ladder first, would have been absolutely absurd. nasa and all other people -- what in the world were they doing? that was impossible. but there is the principle of spreading out the training. that needs to be done and recognized. everything we do is a compromise of different interests, especially when you have not done these things before and you are pioneering something. >> we are going to go to some audience questions. thank you for that. our first is from a judge -- he has been on our show many times. from what it seems, nasa has been overtaken by politics but private companies are
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successful. what is your view of the role private companies will play in future space travel? >> when the airplane was introduced, the barnstormers were occasionally crashing airplanes and the government came along and said, you guys a giving airplane writing a bad name. we would like to give you a job to prove that the airplane is useful. we would like to to carry the mail. one state to another. so through rain, sleet, snow, what ever, the government began flying the mail from one place to another. shortly after, somebody said, if they can take mail, certainly they can take passengers from one place to another. that was the beginning of commercial airlines. the government did not get into the airline business except
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when they are transporting crews from one place to another. i think that the cost of building a spacecraft and a rocket can probably be done much cheaper by processes of profit- making and the commercial interest that bring to gather things that have been pioneered maybe by the government but now they are picking the best and they are doing things competitively. the worst thing you want to do is have the government compete with the private sector. unfortunately that is what we're doing right now. we have a spacecraft build and three spacecraft devolving their capabilities, two with capsules and one that i favor that will land on the runway.
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unfortunately, that does not get as much money peaky speaking of money, to touch on something he said -- he mentions the issue of nasa and funding has been somewhat politicized. $17 billion a year for nasa -- >> that is 0.5%. >> are these warranted, or no matter what the recession is, do we continue to forge forward and put money into nasa and go out there? why do we do this? >> a lot of people that i now, looking back on the last 40 years, will say that ever since the -- apollo, the space program has been a jobs program. how many jobs can we get in your state? the space shuttle passed by one vote. all around the country, we had
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people working different places. i can tell you some pretty brutal stories about the politics that it involved in our space program. it is bringing home the bacon, and the bacon is jobs, because jobs get votes, and votes keep a congressman or senator in office. >> why explore space? some argue folks here on earth cannot afford their medication or mortgage or meals -- maybe more money should go into the infrastructure here. why explore a vast frontier out there -- what do we gain by this vicarious knowledge? >> well, the one word i would use his leadership. when i grew up, there was no doubt in my young mind, especially as a teenager during
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world war ii, which was the number one country in the world? which led the world in benevolence, in the not acquiring of other people's territory, the english-speaking people of the world saved the world during world war i, world war ii, the cold war. unfortunately, we are not quite banded together the way maybe we should be at this point. that is a little bit of an objective for me, to try and bring to gather the british and help their lagging space program so that we, trying to do something as leaders, do not stand out as the only leader, but we have great britain, the u.k., canada, new zealand, australia, and india.
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india is extremely important for us to work with. >> bill underwood, saw your picture with the article "they promised us the moon and we got facebook." it talks about technology and the big problems of the world. can you talk about our priorities? >> i started on twitter and then turned over to my helpers to do it for me. if i were on facebook, guess how many people would occupy my time asking questions all day long? i would not get very much work done. are we putting too much into these? modern communication is with us, whether we like you are not.
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the world used to be run by business and politics. to help the masses. along came something 100 years ago that took over that position of business and politics -- is the communications industry, which learned how to succeed in business. and in politics. it is by telling the masses what is wrong with business, what is wrong with politics. and to infer demand. that is what kind of controls our country these days, communication. it is good. it brings us all closer together. but it also has a way of slanting our look at the world of business and politics.
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>> and next question -- he asks you, what is your opinion of spacex and the emergence of the private sector? >> i think elon musk is a very talented south african person who made a lot of money in paypal and has turned that into forming an organization, carefully selecting people from other companies, and selecting designs that are quite basic. i went to visit him recently, because over the last deadly stand or 20 years i have fancied myself a pretty good aware person of the ways to get into mars and why we probably should not spend the money to put government people back on
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the moon. now we are second to the chinese. once the government sparked a program, you know how hard it is to ever turn it loose. establishing a colony on the moon when you can always bring them back does not give us leadership. we did things like that 50 years ago. we should pioneer out words in the solar system, and mars is the most likely, the most livable place, much more so than the moon. the moon is good because we are close to it and it is relatively easy to get their and get back. you can rotate people. you do not talk about a
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settlement, really, on the moon. more and more people that i know are aware of the economics, aware of history and aware of what this country needs will agree with me that if you go to mars, you go there for permanence. if you just go once and come back or go twice and come back -- i can tell you the senate will find at some other way to spend that money and we will have wasted everything we did. this is a congress that works on short term objectives that help them keep their constituents satisfied by bringing home the bacon. to get elected. excuse me, congressman royce.
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>> president kennedy played a crucial role in developing nasa and the space program. where were you when you heard the news of his death, and what were your impressions of his leadership? >> i was at mit. i thought that was a very positive statement after a new what the mercury program had been set as objectives, in april of 1961, yuri gagarin flew in orbit. what did we do? may 5, allen sheppard wind up and back. just like what richard branson has done.
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20 days later, the president said, we should go to the moon in this decade. a lot of people thought that was impossible. how could we do that? nobody had been in orbit yet from the united states. what kind of rockets can be billed to do it? what is the main principle? he had a great principle -- he was going to build a great spacecraft, but we did not have the rockets to go with it. we needed a rocket that would do everything -- pick people up, land, liftoff, comeback, then back into the ocean again. it was a monster. so he made a rocket that would not be ready until 1970.
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we had to pick to saturn-5's, one to carry the spacecraft. someone said, wait a minute, if we look at what we want to do is get a man on the moon and bring him back -- let's look at segments of this instead of just one spacecraft to do everything. >> 100 years from now, 200 years from now, are we going to look back at today's space program and say, how primitive? in 200 years will you fly to the moon or mars the way we get to new york or london -- how advanced is this going to get? >> time will tell. the marketplace and the leadership and the politics -- do we want to lead the world or do we want to follow? it is my hope we want to lead.
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i do not think we will do that by sending nasa astronauts back to the moon again. by the time they get there, it will be 50 years since we did that. is that the kind of progress we should be making, or should we be reaching out? i developed in the last several years a very strong leadership position that the u.s. should take at the moon. we should build the infrastructure. we should assemble the elements. of other countries, on the surface, from a satellite we are planning now to go to on the far side of the unknown that can do the robotic science, can do the mining for the ice crystals and convert that into hydrogen and oxygen, which is fuel.
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a conference recently in hawaii, i was following a workshop that has been setting up international lunar bases by practicing on the big island of hawaii. you will assemble a large number of large objects. you put the first one down or you expected to land, another one down some distance away -- how do you put them together? do that through a satellite -- motion control. you prove that you can do something like that here in the united states. then we do it at the moon. why my so enthusiastic about that? that is exactly what we want to do at mars. we want to put people on the noon of mars who can then assemble a base that we will then send people.
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we should assure ourselves that we protect crew members from radiation as much as possible before they ever go somewhere. that is the moon, too. >> a two-part question -- do you believe in extraterrestrial life? >> i hope so. >> are we presumptuous enough to think we are the only ones here? >> no. but intelligence -- in a science-fiction story or a movie to come out, tv episodes -- it is pretty historic. but there probably is not a big planet at alpha centauri. we would have found that by now. somebody has to be first.
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somebody has to be leading the pack. life came on this planet in a relatively progressive fashion. the oceans, onto the lands. these characteristics will exist in other places. they're going to be much harsher conditions on a 99.5% of the places that could have life, but there are so many billions in our galaxy, so many billions of galaxies. if we find some live somewhere, chances are it is going to be so far away that we may detect their presence long after they have done anything, because information flows of the speed of light.
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>> fascinating. >> he also asks if you can describe your feelings when you first walked on the moon. >> magnificent desolation. neil's words were wonderful -- he talked about a human being given the great honor to do this and how he was a small human step but, consider the magnitude of human beings devolving on earth, going through all the trauma and looking at the moon for centuries and centuries. and we get a chance to walk on that. that is a giant leap. think how giant to the leak will be when human beings from the planet earth set up permanent settlements on another planet in the solar system.
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the leader of the nation that commits to do that will be remembered tens, hundreds of thousands of years in the future. in the history of our solar system. the pioneers to go there will be written about. people will jump at a chance to be among those pioneers. >> that is a good segue for this question -- he writes, we have not been back to the moon since 1972. it is cheaper and less risky to consider exploring a robotic lee. is this a place for manned exploration? >> not too long ago there were two robots on opposite sides of the moon of mars. spirit and opportunity. they were supposed to last 90 days. they have lasted five years until one of them gave up.
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the other one was still going. the program manager, steve squires, has said, put it in writing, what they have done in the past five years could have been done in one week if we had had human intelligence in a time delay to control the robots. that is what i'm proposing -- so we go to the moon of march so we can control the robots, not just from the surface of the earth but from a stable point on the far side of the moon so that we can look at the south pole where there are craters that hold a lot of shells. it is cold there, there are ice crystals -- that is where the
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u.s. wants to establish a main base on the moon. if we forget about the moon and do not go there -- do you think that will happen? no. china will decide where the main bases going to be. we know more about the noon than any other country. we have been there. why should we turn over leadership? that is going to take a strong leader to assert that we will build the infrastructure to help other people. we should put the first habitation, not for our people to go there, but so we can learn how to cover it with lunar soil for radiation protection. then put some other inflatables that they are building in las vegas. he wants to put those as commercial activity. we really need to bring
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together commercial activities and government activities, much better than we have done in the past. >> jerry harrington asks you, how soon if ever will a man be sent to mars? will it take eight months to get their? >> back in 1985, i was trying to come up with a better way to go to the moon with something that would swing by the earth, swing by the moon, and then come back to earth and keep going back and not stop, but just keep visiting the noon and the earth. it does not turn out that that -- the purpose is to land a somebody, but if your purpose is to take a tourist flying by the noon, it still is a good idea, but it did not fall into favor with nasa in 1985. a former administrator of nasa said, why don't you look at
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mars? some people have been doing some ratio-type orbits. it took 56 different spacecraft in order to give you something that was beginning to look practical. i looked at that, and i came up with one or bet that cycles from earth, five months later swings by mars, comes back to earth, keeps doing the same thing. there are called aldrin orbits. it is not the best, by it begins to pioneer a way that has now evolved into every other opportunity we have -- the speeds of approach by earth and mars are very low. there are lots of advantages to having to rather than one -- two rather than one. purdue university and buzz
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aldrin have publicized these things. it establishes a transportation system on into the future. not just once -- and you have to build another series of spacecraft. all you do is join up with us and get off when you get there. since 1985 -- not yet. >> a recent graduate and discouraged job-seeker -- the question is, you have had so many successes. what is an important phase you are set back that has impacted you, and what is your future success? you had no failure? >> i had to mistakes that i made -- two mistakes that i made. the worst one was before i left nasa. i went down to look at the next
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program after apollo. they had progressed quite a ways on that. it was two-stage and fully reusable. it would fly back and land -- it would go into orbit and come back and land on the runway. two stages, fully reusable. we would love to have that today. i'm talking 1970. you know why we did not get it? one nasa center wanted to put a crew in the booster to come back and land. there were seven teams bidding on this. i looked at the models -- i saw the windows in the booster. i said, what is this for? we have a crew in there to fight back. that is an automatic maneuver that you do, and if something goes wrong during the launch, you separate were the people are and to blow up the booster. you cannot do that if you have a crew in there.
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you know how long that lasted? another half a year or so. a lot of money and a lot of time went into that. we helped to piece together a space shuttle, crew and cargo to gather, that was going to fly 50 missions a year. you know how many we flew? 9, usually six missions. we retired and now. they have flown maybe 35 missions. they were designed for 100 missions. but they are big and they are unsafe and they killed two crews. >> did neil no he was going to see the famous one small step for man, or was a spur of the moment thing? >> somewhere between the two. [laughter] if he knew, he did not tell me. he said something to the effect
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of, if we land successfully, i will think of something. but that is neil. he comes up with the right thing to say. except he did not put that a in there. [indiscernible] >> roberts asks, is it true you receive a corvette when you got back from the moon, and do you still have it? >> there is an all navy crew on apollo 11. all three of them had gold corvettes. there was a race car driver who ran a chevrolet cadillac car place in florida. he was a friend of the astronauts. there is something in -- general motors calls it a brass hat deal where they are able to let people drive a car for
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publicity. what better publicity than letting a asked not drive a corvette? >> he wants to put it on ebay -- that is why he is asking. >> i have got a mercedes. [laughter] >> how many miles on it? i'm just kidding. >> built in the 1980's -- 70,000 miles. >> a brand new car. have you worked at all on the space telescope? what do you think about its mission? >> it is a pioneering information gathering of the cosmos out there. like the hubble telescope was. it will give us many new pieces of information that will give us a better understanding of
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the origin of life here, the origin of the galaxy, of the entire universe. it is not close to earth. it is going to be at a considerable distance away. going to it, to service it, will not be easy. it has overrun its budget and is taking a lot of money away from many other programs, but once you begin to make an investment in something you cancel it out? sometimes you have to. i can think of one that deserves canceling right now. it is called the senate launch system. [applause] mandated by the senate in law, and the law says it will be
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made out of heritage components. you know what that means? old stuff. things they have been working on so you do not have to build a new program and new jobs, and maybe lose an election. >> we have time for a couple last quick questions -- this is a very interesting question. can you talk about the relationship between you, neil, and michael collins? it seems to me he is the forgotten one as the third member of apollo 11. what was it like between you folks? >> there is a rotation of crews based on kind of when you get into your first flight. at an upcoming flight, you have a crew and a backup. as they are getting ready to fly, you have two.
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so the backup on this flight becomes the prime. that is the starting with rotating the crews. how you get into debt and get started is quite a variable. he may lose a crew -- we lost a crew in st. louis and had to bring in a new backup crew. we lost apollo 1. that shuffle things around. we were planning get to the moon before the end of the decade -- we had to take some hurried steps. sending the crew on a second spacecraft, the apollo, the first time we launched the crew on the saturn 5, we send them to the moon on apollo 8.
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we thought maybe the soviets were going to take one cosmonaut and fly around the moon and land. they had done this unmanned. that is why the advanced apollo 8. as it turned out, because of changes in the lunar module not being ready, neil and i were on the back of a crew of apollo 8. we help the crew. frank, phil andrews, and jim. we worked together as a team. mike collins had an operation -- he was capsule communicator. he was not on apollo 8, but we have him join us because there was a shifting around. after apollo 8 came back, during christmas of 1968, when they came back -- mid january,
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our crew was announced as a potential first landing. if the next two missions did what they needed to do. we had to check it out on apollo 9. then in the dress rehearsal, but not a landing. that went ok. as soon as they announced the crew, guess what the questions from the press are? who is going to land on the moon? who is going to be adverse? this did not help crew morale. what is he going to say? who is going to coach him?
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there was not the loss of privacy that there is going to be in the future. when you have got cameras all over the place, looking over to see what the crew is doing every minute of their mission. i hate to see that they come. i kind of like my privacy. other people, they like to be able to say what they want and do what they want. >> finally, why did you retire from nasa? >> when we finished our world tour, we were invited to the white house. we had a dinner there. president nixon asked the three of us what we wanted to do. he said, mike, i know what you want to do because you have been helping secretary rogers and the state department.
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mike wanted to work with the state department in some of its contact with other nations. he also designed, did not build, but supervise the air and space museum in washington. very well done. neil wanted to stay with aeronautics. i wanted to go back to the service i had come from -- the air force. as it turned out, i was the first astronauts to ever go back to active duty. i felt my experience being at the air force academy for the first year when it opened up, when the first class came in, that the faculty would be a good job as commandant of cadets. that is not what happened.
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for those of you who might be familiar with names of people, i had a classmate whose name was brandenberg. he got the job because his father had been chief of staff of the air force. he went to the air force academy. where are we going to send aldrin? we have an opening at the test pilot school. but we know he was never a test pilot, but that is okay. after 11 years away from the military, we will send him back to command the test pilot school. and i did the best job i could. i felt good with how i dealt with those students. but it was not what i was looking for. it was a disappointment when it became clear that due to certain circumstances, i chanced
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to retire. >> in closing, is there any final thought you want to leave this audience with, whether it is your career, a nasa, being on "dancing with the stars." what is it you want to leave us on? >> i tried to accept invitations that come along to do things. that is why i am here. to try to explain to you through questions be burning issues that i see in a space program. it is leadership and exceptionalism, and not doing what we have done earlier just because we can find things and get a pay back quicker.
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i'm interested in leadership, but not going back to the moon and spending a lot of money but we did already when robots can do that just as well. we can help foreign countries to do that. then we can lead the world. we can. we really can. will we do that? i will work on it as long as i feel there is a chance. after a while, we cannot keep working on something that just is not going to happen. because of short-term people. mostly politicians. [applause] >> thank you very much.
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[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] >> and the governor chris christie gave his state of the state address. >> we have waited 72 days as a state, seven times longer than the victims of hurricane katrina waited. one thing i hope everyone in america now clearly understands -- new jersey, both republicans and democrats, will never stand silent when our citizens are being shortchanged. [applause]
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the people of new jersey are in need. not from their own actions, but from an act of god that delivered a natural, and, and financial disaster. let me say, on behalf of all new jerseyans, we are thankful to the people of the united states, because we know they will honor the tradition of providing relief. we have stood with the citizens of florida and alabama, mississippi and louisiana, iowa and vermont, california and missouri in their times of need.
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now i trust they will stand with us. president >> obama on sunday signed a $9 billion aid bill for hurricane sandy flood relief programs. next tuesday the house is expected to vote on another bill with an additional $17 billion of aid and an amendment offering another $33.7 billion that would fund longer-term projects. you can see the speech at c- and, as always, the house is live on c-span. >> tomorrow, the national governors' association will deliver the state of the state address. it will hear from the chair, the governor jack markell of delaware, and the vice chair. live coverage at 10:00 a.m. eastern. on c-span 2, a conversation on the future of afghanistan. that begins live at 10:00 eastern from the atlantic council.
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now, a hearing of nasa's mission looking at their strategic plans, robotic space flights, and private-public partnership. this house science and technology committee hearing is to end a half hours. -- two and a half hours. >> i recommend myself for five minutes or so for an opening statement. i want to recognize some of our colleagues, and our colleague and friend robert walker, the former chairman of this committee for many years, for agreeing to testify here today. i thank you and the other witnesses for being here. it takes a lot of effort and time. and your knowledge and experience is very useful to the committee.
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as we consider legislation, we also think you for taking time to appear here today. nasa and its space mission. and aeronautics budget that can no longer support full-scale demonstration flights, no clearly articulated vision for human exploration program beyond international space station. the international space station is number one. we've got to get there first and have some security there. with regard to human space flight, during the national debate, we merged guiding principles, resulting in the nasa authorization acts of 2005
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and 2008. there was a consensus on the overall strategic direction. that consensus was short-lived when the administration abruptly canceled submission of a fy-2011 budget. no one got everything they wanted. for lack of a clear consensus, resulted in no effective way to prioritize the many competing demands. it has been clear over the last few budget cycles that there are fundamental disagreements. congress insisted and the presidential compromise included but -- a heavy lift
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rocket development program, a general lack of consensus on goals and destinations has sent the seed for disappointment with large developing programs. the space launch systems compete for the same diminishing resources. since the commercial core program supports the i.s., -- i.s.s., perhaps should be funded by the space operations budget. we're in a challenging budget
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environment. fiscal realities demand that nasa become more efficient. consensus has to be established among agency stakeholders, and also to clarify nasa's strategic vision, goals, and mission. the good work that nasa has done and that nasa can do in the future is so very important to me, and to everyone here in this room. i want to preserve our international space station. it is not likely with this electorate than we can expect to go to mars until people can go to the grocery store. it is about the economy. the economy has to improve. i want to work together to
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insure the american people can get the kind of results that nasa is capable of producing. we have a distinguished panel of witnesses today. this should spark much-needed national dialogue about nasa's future. the group is uniquely qualified to start this important discussion by sharing their own perspective about the strategic direction of america's space program. that concludes my remarks. i now recognize mrs. johnson for her opening statement. >> thank you very much, mr. chairman, and good morning to all. i want to welcome my witnesses and a former chair. i look forward to all the testimony.
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at this time, the democratic caucus is having an organizational meeting that was supposed to start at 9:00, but because of the lateness of the ranking member meeting, it started a little bit late. today's hearing is an important one for the committee. nasa is a critical part of the nation's research and development enterprise, as well as being a source of inspiration for young people and a worldwide symbol of american technological power, leadership, and good will. we want nasa to succeed in its endeavors. its success benefits our nation in many ways. in establishing nasa to the space act of 1958, congress
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directed the agency to contribute materially to the role of the united states as a leader in the aeronautical and space science and technology, and the application thereof, to the conduct of peaceful activities within and outside the atmosphere. successive nasa authorization acts over the years have stressed the need for a balanced program of science, aeronautics, technological research, and human spaceflight and exploration. results have been the this balanced program has given advances that have enhanced knowledge, promoted innovation, and economic vitality. it is inspired our youth and deepen our understanding of the youth and environment. in recent years, nasa's ability to carry out its mission has been eroded. in that regard, it is estimated
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that nasa's purchasing power has decreased by 18% from fiscal year 1992 to 2012. last year's budget was about $1 billion less than fiscal year 2010. the cumulative impact of this budgetary instability has been felt by all of nasa's programs and its institutional infrastructure. this problem is highlighted by nasa's inspector general in a recent report. we will hear similar concerns raised by the national research council with us today as he discusses a recently released report. the issues considered by the panel are not new to this committee. we have heard them raised in
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one form or another. we hope the findings of the n.r.c. will encourage the congress and administration to put nasa on a firmer footing and recognized nasa for the national asset that is. we should recognize that those programs are long-term undertakings. that is a challenge. we will face it in the coming months and years as we work to put the nation's financial house in order. investments such as nasa are
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just that, investments. it will only be in retrospect that we learn the true cost of walking away from investments such as nasa. i firmly believe that those costs will be high and long lasting effect go down such a destructive path. i hope we do not do so, because other nations increasingly recognize the benefit a strong and active space program can deliver. as a result, we see them being willing to make the necessary investments to build the capability. mr. chairman, our leadership in
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space and aeronautics are at stake. our children's future jobs and long-term global competitiveness are at stake. resting on our laurels from prior accomplishments is not an option. whether in science, aeronautics, or human exploration. that is not to say that we should not do all we can eliminate waste wherever we find it. but all of those efficiencies will be not if we do not also recognize sustained investment in research, technology, and development must also be made if nasa is to succeed. mr. chairman, before i conclude my remarks, allow me to take a moment to them for their service to our nation. each of them will be departing
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the house of representatives at the completion of the 112th congress. i want to wish them well. they have been thoughtful, hard working members of our committee caucus, and i shall miss them. i yield back the balance of my time. >> are there other members who wish to add opening statements? it will be added to the record. i like to say a few words about several members of our committee and think of for their dedication to congress and to the senate space and technology committee. on the republican side, roscoe bartlett. roscoe, i always enjoyed telling him he is too old to be here.
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[laughter] he is a great member, and i am surprised and disappointed that he was defeated. i pray for whoever is going to take his place. an outstanding member. todd akins, missouri. he is a good man. he served well for us. people kept telling me to put
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him off this committee and i said i can put anyone off this committee, but we could not do it without [inaudible] sandy adams of florida, still young enough to continue her fight for nasa. dan made the mistake of opening up questions, and the way the russians ask questions, they
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make a 15 minute speech, but after the speech they said, if you love us so much, why do you still have all those guns pointed towards us? dan and i were way back away from them. there was a rail between us. they couldn't hear what i said to him. i said, tell the s.o.b. i don't trust him. he said they would run both of us out there. his son is a very fine young man, did a wonderful job as vice chairman of this committee. we will miss the young man.
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how do you lose a guy like jeff cravaack? very knowledgeable, fought for everything that was right. he served with me on -- i believe we served together on the transportation committee. is lynn here yet? she is not here. brad miller of north carolina. i have learned something from him, several things. he goes back to one of the better law practices in north carolina.
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all my folks from cannon mills, kannapolis. you are young enough to come back. i wish you well. and hansen clarke. he was a great guy. it was an honor to serve on this committee with all of you. no matter what they go to next, there will always be friends and colleagues. miss johnson, i think you again for yielding back.
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at this time, i would like to introduce our panel of witnesses. robert s. walker is a former chairman of this committee. bob led this committee from 1995 to 1997. welcome, bob. retired major-general ronald sega. he currently serves as vice president enterprise executive for energy in the environment for colorado state university and ohio state university. led a distinguished career in the u.s. air force. d.o.d. executive force base, and prior to that, director of
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defense research and technology. he flew two space shuttles. we certainly welcome you. >> we welcome, honorable marion blakey, president and ceo representing more than 150 leading aerospace manufacturers. ms. blakey served a five-year term as administrator of the f.a.a. we do certainly welcome you. associate professor for space science and engineering at the university of michigan,
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specialist in robotic exploration and space and team leader for the development for the fast imaging plasma spectrometer on messenger spacecraft. we certainly welcome you. dr. scott pace, director of the space policy institute. from 2005 to 2008, associate administrator for program analysis at nasa. we welcome you as well. as our witnesses should know, testimony is limited to 5 minutes, after which members of the committee will have five minutes each to ask questions. you are not just help to 5 minutes.
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your time is value. you took your time to prepare to come here. it took you years to be prepared to be asked to come here, and you are here. your time is very, very important. we will not hold you to the five minutes. just do your best. our committee protocol dictates we recommend bob walker as the first witness. he refers to many of the details in the report with his suggestion. the committee and now recognizes you for five minutes to present your testimony. >> mr. chairman, ranking member johnson, members of the committee, colleagues, i am
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vice chair of the national research council's committee on nasa strategic direction. it is my pleasure to come before you today to speak to you about the work of our committee. our committee was charged with considering the strategic direction of the agency as set forth most recently in the 2011 nasa strategic plan, and other relevant statements on space policy as issued by the president of united states. with assessing the relevance of nasa's goal, were charged with recommending how nasa could establish and effectively communicate a unifying vision for nasa's strategic direction.
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our committee was not charged with a developing strategic goals for nasa. we met five times throughout 2012. the committee received input from nearly 800 members of the public, through a web based questionnaire. small groups of committee members visited each of the nine nasa centers and jet propulsion laboratory. the resulting report entitled, "nasa's strategic direction and the need for national consensus," is a report by the committee. despite a turbulent policy environment, the agency has
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made many astonishing accomplishments. without consensus, the agency cannot be expected to work toward long-term priorities. there is a mismatch between the portfolio of programs assigned to the agency and the budget allocated by congress. what we have found during the course of our deliberations is rather obvious. although nasa develops a strategic plan on a new regular basis, the agency itself does not establish its strategic goals.
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those are the fault by the national leadership and key stakeholders within the national leadership do not always agree on the goals of the agency should pursue. this process should apply within the administration and between the administration and congress, and should be reached only after meaningful technical consultations with the private sector and potential international partners. the strategic goals and objectives should be ambitious, get technically rational, and should focus on the long term. following the establishment of a new consensus on the agency's
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future, nasa should establish a new strategic plan that provides a framework for decisions on how the agency will pursue its strategic goals and objectives. allows for flexible and realistic implementation, clearly establishes agency wide priorities, died the allocation of resources within the budget and present a comprehensive picture that integrates aeronautic activities. to reduce the mismatch between the agency's activities and the resources allocated to it, the white house, congress and nasa could imply any or all of the following four not mutually exclusive options. the committee does not recommend any one option or combination of options, but presents these to illustrate the
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scope of decisions and trades that could be made. option one, institute an aggressive restructuring program to reduce infrastructure and personal costs to improve efficiency. option two, engage in and commit for the long-term to more cost sharing partnerships with other government agencies, private sector industries, and international partners. call option 3, increase the size of the nasa budget. option four, reduce considerably the size and scope of elements in the current portfolio. this would require reducing or eliminating one or more of nasa's current portfolio elements, human exploration, earth and space science,
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aeronautics, and space technology in favor of the remaining elements. each of these simple options with the possible of option two would require legislative action. my recommendation states first, congress should adopt regulatory and legislative reforms that would enable nasa to improve the flexibility of the management of its centers. nasa should transform its network of field centers into an integrated system that supports its strategic plan and communicates in strategy and advances its strategic goals and objectives. with regard to partnerships, the committee recommends nasa should work with other
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government agencies with responsibilities in aeronautics and space to more effectively and efficiently coordinate the nation's aeronautics and space activities, and the united states should explore opportunities to lead a more international approach. both in the human space program, and in the science program. finally, the committee was impressed with the quality of personnel and level of commitment of nasa also civil service and contractor staffs and with the agency in general. however, the committee also heard about the frustration of many staff with the agency's current path and limitations imposed on it by the inability of the national leadership to agree upon a long-term direction for the agency. only with a national consensus on the agency's future
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direction, along the lines described in this report, can nasa continued to deliver the wonder, knowledge, the national security and economic benefits and the technology that typified its history. thank you for the opportunity to testify. i would be pleased to respond to any questions. >> thank you, general. it gives me pleasure now to recognize robert walker. i have listened to bob as a democrat and republican and i have respected him always as both. we recognize you for five minutes. or as long as you might take, bob. >> thank you very much. thank you for the warm welcome. i want to first congratulate you for the leadership of given to this committee. you have led it with grace and
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good humor. you've given chairman smith a strong base upon which to build the science, technology, and space leadership for the future. thank you for all of you have contributed here. if you believe as i do that humankind's destiny lies in the stars, if you believe as i do that nasa should be an instrument in the fulfilment of that destiny, the work of preparing nasa for the daunting challenges of strategy, budget and relevance in the 21st century is truly the work of shaping the future. the recently released report by the national research council does a detailed job of documenting the challenges that nasa faces. lack of adequate resources, lack of a agreed upon direction, aging infrastructure, emergence of other space capable nations, collapse of some international partnerships, increasing the relevance of the aeronautical research program. n.r.c. provided four options
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for addressing an uncertain future. i choose option two. engage in and commit for the long term to more cost sharing partnerships with other u.s. government agencies, private sector industries, an international partners. within that option, i will emphasize the public-private partnerships. i believe them to be the best way to obtain the resources so vitally needed to make nasa's mission is achievable. i see that mindful of the fact one of the most important cost saving measures would be to use the totality of u.s. assets for u.s. purposes. it makes no sense for coup nasa spend billions on technological development. some available technology may have to be modified.
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the bulk of the costs can be shared. nasa's basic role must be to do projects that pushed the envelope of what we know. high risk leads to new technologies. that combination of risk and reward will underpin the next generation of space knowledge and products. space and technology leadership requires a much broader view of the space community that has been traditional. if nasa is to have the resources it needs to maintain a preeminent role, it must expand its funding base in the reaching beyond the appropriation process on capitol hill. i say that letter point with all due respect. no federal budget in the foreseeable future is going to provide nasa with the money it needs to do everything we wanted to do. nasa must see entrepreneurship and enablement as key components of its science technology and exploration program. there are positive signs that
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nasa sees merit in this approach. the commercial cargo and crew programs are encouraging. congress needs to expand the authority to move even more aggressively in this new direction. too often, the steps taken thus far have been grudging because they do represent a significant cultural shift. that shift has been endorsed by several recent commissions a look at nasa's future and are concerned. 2009 when commission called for broadening the space related community and restructuring nasa to interact with that
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committee. it was believed that nasa could benefit from expanded community as it attracted outside investment in its activities and uses people and facilities to enable progress. the larger network of people and industries has to be a part of its strategic plan. it begins with buying available services from non-traditional sources. we already know there is interest. new companies have agreed to provide services to nasa and pursue business beyond nasa. those companies should not be seen as rivals are detriments. the are the outgrowth of past nasa successors. moreover, thinking in non- traditional entrepreneurial
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ways potentially can access tens of millions, perhaps hundreds of millions of dollars of private investment and nasa activities. if programs and centers were restructured to take advantage of private capital, there is no end to potential collaborations. would anything be harmed if names were attached to particular projects? formula one racing, the sponsorships their pay for operations costing $200 million
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to $300 million. that is enough for a whole space flight. congress will have to be willing to make some adjustments necessary to access that kind of future. when the go-daddy rover is traversing martian terrain, we will be on our way to fulfilling our destiny in the stars. thank you very much. >> and that is just the way it is. thank you, mr. walker. i now recognize honorable marion blakey. >> thank you, chairman hall.
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thank you for the opportunity to be here again. i am marion blakey, president and chief executive officer of the aerospace industry association, the nation's premier trade association for aerospace. we are very proud of the fact that we are documented space systems and how they're woven into the everyday lives of americans. nasa programs are hallmarks of the character of our nation and leadership.
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as americans, we're always looking for to the next great frontier. we need to think carefully about changing from current programs. it not only takes the consensus, it takes resources and capabilities. some the we are already building today. had we not committed to the f-1 rocket engine program in the 1950's well before president kennedy's apollo announcement, we would never have gotten to the moon by 1969. this engine enabled a wide variety of human spaceflight missions. how do we keep nasa moving in the right direction? nasa needs stable, long-term investment and steady policy goals. more funding would be better. stability is essential to both
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space mission success and the health of the united states space industrial base. an examination of nasa strategic direction must consider the impact to this space, which is also essential to the national security space capabilities as well. but it take this opportunity, mr. chairman, to recognize you as the longest serving member of the committee, by giving nasa solid guidance with the 2010 authorization act, you've demonstrated the leadership essential to ensure future industry investments and recruit new airspace pilots. three goals, first, we must fully utilize the international
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space station, which is a unique national lab. the quickest way for a nation to access the international space station. it was terrific to see the success of the first commercial cargo supply mission. nasa's commercial initiatives promise to bring down costs, and they will free resources for other programs. second, nasa's capabilities are a realistic approach that is within the fiscal limit that we can then build a space systems needed to explore new destinations. to date, significant progress has been made on this program, including the delivery of the first orion capsule to florida to launch. third, we must maintain global
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leadership in space science. let's get the web telescope operating, fall upon our mars exploration success, and replenish our indispensable earth observation system capabilities. the specter of sequestration concerns me greatly. not only would it lead to program delays that would prove more costly in the long term, but it would also have the immediate impact of putting more than 20,000 nasa contractor jobs at risk. that is the conclusion, and this is very new, of george mason university economist in a study we are releasing today. i will make certain that all members have a copy of this
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study. the report highlights the impact of nasa procurement spending reductions in 11 key states. texas would lose nearly 6000 nasa-related, highly skilled jobs as a result of sequestration. that is a $320 million impact to the state of texas. in conclusion, by focusing on investments and support of the 2010 act, the congress can insure the health of our space industrial base and a short our space program will remain second to none. i thank you for the opportunity to testify on behalf of the space industry. i look forward to your questions. >> thank you for your testimony. and for your accolades. i yield you another hour for your kind words. good testimony, and we thank you. doctor zurbuchen, i recognize
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you. >> mr. chairman and members of the committee, this for the opportunity to testify. i am from the mountains in switzerland. i am a professor of space science and aerospace engineering at the university of michigan. i am also the associate dean for entrepreneurial programs. this is a period of limited resources. we need to focus to position ourselves for better times. the way to do this is to ensure that a talented workforce will be available, and disruptions will not interrupt our pursuits.
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we need to pursue a strategy in which universities as well as nasa centers are fully engaged. today i want to focus on two key aspects of this strategy, focus on people and the focus on disruption. the number one priority of the space program, and especially its science program, should be talented people. every mission in space is carried out by people, not paper work. we need people and their know- how. we have to ensure that nasa space missions have access to the best talent.
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we must recognize that top talent does not just hang around and wait for better times. builders want to build. innovators will innovate. nasa leadership must focus on the aspirations and dreams of the innovators of the future. second, some of this talent will be at nasa centers, but most of the talent will be in academia and industry, particularly in small companies. encouraging competition and emerging space centers will keep top talent focused on efforts that ultimately will aid this nation in achieving its most ambitious goals, both technical innovation and reduced cost. the next priority is innovative disruption. these programs focus on smaller spacecraft, rapid turnaround
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missions. consider for example the program at the university of michigan. the first one failed a few weeks into orbit. the second one has now made measurements for over a year. research published in our premier journal. this mission has provided hands on experience for 50 of our best students. some of them work at nasa centers. they got their experience, as
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most do, in the u.s. i do believe that a program like this requires small and responsive missions and project from sub orbital to large, strategic missions. it is a big priority. discovery, new frontiers, the interclass missions, depending on the respective communities. these missions have provided the best value for the money investment. consider, for example, the university of michigan mission that was recently focused to
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eliminate one of the biggest concerns and prediction of big storms, such as hurricanes. the uncertainty that relates to the strength of the storms. the science payout is approximately 100 times smaller in mass, in price, and in power than conventional satellite went measuring instruments, which enables an entire constellation to be flown at lower accounts. this reduces the revisit time. from days to hours. these short-term priorities must be aligned with thinking worthy of nasa. we must remember that the work we do is not purely scientific. technological, economic, or
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military based. thank you so much. >> thank you, dr. zurbuchen. at this time, i recognize the doctor for five minutes. >> thank you, mr. chairman. it has been noted that the nasa strategic plan does not drive nasa budget requests or activities within those requests. it is not surprising there are numerous disconnect between stated policies and their actual funding. such disconnects are not
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inevitable and can be resolved by the white house and congress. nasa budgets are a more accurate reflection of the facto national policy than the nasa strategic plan. the obama administration's stimulus program was greater than nasa's budget. the united states sent humans to the moon, built and operated a space shuttle, explore the solar system, and contributed a share of the international space station for less than the cost of the american recovery and reinvestment act. into a's environment, but seeming discretionary expenditure for civil space exploration will be challenging unless there is a clear rationale linking such efforts
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to broader national interest can be supported in a bipartisan manner over many years. but hope to convey is that while nasa faces challenges, a way forward exists to put the agency on a more stable and sustainable foundation.
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[captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] >> so we should punish them for the fact that they have been honoring and paying appropriately so when we go through and provide principal reduction and say you have been a good guy so you don't -- >> i'm not saying we're going to go put them in the stack aid and punish them because -- stock aid and punish them because they are paying on the mortgages. they are showing no signs of
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distance ress. if they lose their job and have the niblet pay it, we should look for some forbearance program for them in that circumstance in the hopes that thai that borrower will be able to get a job and resume paying on their mortgage. so they they are underwater, that is a massive disservice to the $5.5 trillion that went out to fanny and freddy. you can't say that wesht just give away money to these type of borrowers just because they are unfortunate that they have gone underwater. >> i think it would be useful for folks watching this debate to hear more about your proposal and the issue so we can get it out on the table and then we can continue this line of
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discussion. >> it is important for people in the audience to understand that -- and tom made a good point of this earlier which is america's the bulk of the balance as tom pointed out are actually ensured by freddy and fanny. that has cost us as taxpayers a few hundred billion dollars so far for that guarantee. there is a small segment around 4.7 million loans that are called private label securitizations. when you hear about mortgage-backed security, about 4.7 million borrowers, about a trillion dollars as tom indicated. we focus on that segment, the p.l.s. segment because those bondholders, the investors in those securities do not have the benefit of the united states
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government guarantee on their performance. they live or die on the fact that you pay your mortgage or you don't. because of that, the securities trade at market. they reflect the fact that there are huge problems in that community. i brought one slide in. right now is a perfect time to put the slide up. just to frame this. just so i can see it here. if that is ok. from one underage fannie mae's third quarter. this is the united states view of the p.l.s. sector with respect to the portion of the bonds they own. they own some of those bonds and under their rules they tell us what they think about the underlying mortgages and these are the numbers you want to look at. fannie mae says there is about $28 billion on their balance sheet, exposure to mortgages in
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this sector. they expect a 50% default rate. this is before. going forward on their existing holdings. 50% default rate and when it defaults and goes into foreclosure, they expect a 66% loss under that mortgage. half the mortgages, 2/3 of the principal written down. it tells you fannie mae believes there are roughly 2.25 more forclosures coming. we think fanny and freddy and the sbranks other avenues. all the programs you talked about for reform and helping these home owners. most of those programs are not eligible to be used in this sector. the p.l.s. homeowner has very
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few options. our thesis is allowing these home owners to write down the mortgages, you re-reduce the am of foreclosures and allow them to stay in their home. that's our objective. how do you do that? how do you write down the principal? they are owned by trusts. it would be great if we could go to the trustee or servicer who owns the trust and say you know, you're going to have 50% of your people defaulting and lose 2/3 of your money and by the way, your bonds already trade reflecting that. you have taken that loss already. why don't we allow the home owner to stay in the house and simply write down their mortgage? the trustee and servicer cannot write those down. cannot sell them. there is a whole bunch of things
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they can't do. they are stuffed in that trust. what is the way we can get that home mortgage taken out of that trust and put in the hands of someone who has a reason to want to help that home owner. we looked around and decided the only way you could get that loan out of that trust was using a power that community has had that that was given to it in the constitution of the united states and handed down to the state constitution and that is the power of condemnation. i've said this before. i'm not as dumb as i look. if we could find any other way than using eminent domain, don't you think we would come up with another idea? there is no other way. that's how we got there. a local community now can condemn that mortgage and take it out of the trust. by the way, pay the trust fair value. fannie mae will tell you what the fair value is. they have already dope it right
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-- done it right here. that's in essence a program that we have -- we're discussing with some several dozen communities around the united states. >> thank you, senator. is there really no other way? >> steve argues that there is an inability for servicers to write down principal on private label securitized loans absolutely false. writing down a principal has been increasing over time on private label securitized loans. there is no ability for a servicer of a fannie or freddie loan to actually write down. there is a big distinction there. second, he says that we, m.r.p., can't figure out a way to get
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these loans out. it is because m.r.p. doesn't actually own the loan. what they are proposing at the core of its proposal is m.r.p. wants to take loans from somebody else. that is what eminent domain is all about. the person does not want to sell you those loans so you grab them without that person's consent. we'll come back to legal issues throughout the discussion here. sticking to the policy side of it, there is a reason you can't get out of the trust. the reason is the united states government, the u.s. department of treasury through tax law, does not allow those loans to be sold out. when you come back to the legal analysis figuring out whether m.r.p.'s proposal would violate interstate commerce, the answer is the loans are already regulated in these trusts. it does allow them to be written down antowain trust as long as
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the servicer believes that is in the best interest of the investors. they would have you believe that the servicers in fact are not operating on behalf of the best interest of the investors. they are being duped by the servicer not to do the right thing on their loans. i have a very hard time going back to institutional investors who manage trillions of dollars of assets on behalf of pension earners going back to them and saying you're irrational. you don't know what you're doing. go tell those servicers to write down massive amounts of principal. that's in your best interest. if they thought that, they would be doing that. if someone loses their job and has negative equity, they would take a program that they have put into effect that is actually write down some principal and give them some shared appreciation in those
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circumstances. if someone took out a loan and hasn't had any disstress since then and is still able to pay their mortgage, what is the sense -- wipe away all of this underwater debt, that is better for those individuals. all the pension money and all the institutional money fund money that has been put to it would be wiped away. moody's did a study on this and said if you were to take the m.r.p. proposal and implement it nationwide, 30% of the value of mortgage backed securities would disappear overnight. since there is $1 trillion of outstanding mortgage-backed securities means $300 billion would be lost by funds out in the universe. that combined is much more than fannie and freddie has lost the american taxpayer, which is about $200 billion.
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>> that is absolutely the case that servicers don't act in the best interest of the investors. i think the lack of the unity of interest between investors and servicers and trustees is one of the reasons that so many institutional investors are resigned from the membership of your organization because they think that that trust they use are not acting in their interest and their interest would be best served, if there were reasonable negotiations. they are certainly concerned about this proposal, but part of that is i don't think that the trustees can be counted upon to act in their interest in a condemnation proceeding. they won't fight for fair market value. they will throw in the towel because they have got nothing to lose. this is a scruped system. -- screwed up system. >> to use a technical term?
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>> that is actually is. i'm not sure if that is a legal or economic term. but if it's true that the constitution is not a suicide pact, mortgage and servicing agreements are pretty much suicide pacts. they do separate out from the investors, the management and the management has a lot of incentives not to modify mortgages, which would be in the best interests of the investors. you know, when a mortgage is forclosed upon, the losses are 50% for the value of the mortgage. more -- the estimates bounce around. it is obvious that investors would love to see logical reductions of principals so that home owners with a mortgage on that house would be in a sustainable mortgage and they
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would not have to forclose and it is not happening. we can argue about why exactly it is not happening but clearly it is not happening. that was an advantage of bankruptcy, which you were for. i was for. i introduced the bill in the house. that got beaten back in the senate, defeated by the banking interests and that is the advantage of eminent domain. it is a government power that doesn't worry about who has got what interest and who has got what power? it is the power to take something for public purpose. property for public purpose. take it for public purpose at fair market value. you probably make money. that's why this business model actually works. i understand the concerns to
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investors that their interests will not be represented, but something has really got to give. >> one of the questions that has come up with this proposal is that at least in the primary thrust of it targets homeowners who are paying their mortgage currently does that concern you at all? do you think that eminent domain should be used for home owners who are in default or just to cut through for anybody? >> i think a phrase that both lawyers and economists like, it depends. you know i think where we don't want to be, which tom described earlier and actually steve as well is in a position of not modifying the mortgages of people who are performing because they have not shown that they are going to default and then not modifying the mortgages of people who are not performing because you don't want to reward them for their nonperformance. by the time you reward them, you
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don't have much left. it probably does have to be tailored to the circumstances. probably specific whether a homeowner is able to pay this morning and likely default and lose their home to foreclosure and would they be able to perform oen a mortgage for a -- on a mortgage for alesser amount that would be a better deal for the investor than would foreclosure. >> i want to put a slightly different wrinkle on the table and ask you, in the past eminent domain is a power used in a ways that disadvantage communities of color and is there any concern about whether this is an expansion of the powers of condemnation and are there any concerns about that? >> i want to get to that because i believe there are real concerns about the use of eminent domain, but i just want to say first of all the idea that the servicers have been
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acting rationally with respect to loan modification, really, i want to just come back to that for just a second. we would not have the settlement. we would not have o.c.c. concluding yesterday another multibillion dollar settlement if it was rational. it would be good if they were because we would have probably the end of this crisis at least two years ago. having said that, i believe there are concerns with respect to how eminent domain could be used in a circumstance depending on how the loans are selected, how the program is designed, it could be that individuals who actually need the assistance the least -- i mean need the assistance the least, which is tom's concern, actually get the benefit and those who are struggling don't. i would say the program would need to be designed such that the highest priority would be people that experience some sort of financial distress such that
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the principal reduction allows them to remain home owners. the second thing is depending on how the loans are selected. loans would be selected in nonhispanic white communities but not necessarily in lat even and african-american communities. it depends on housing types, etc. i think there are real concerns from pri perspective. mot necessarily from a race perspective but from a housing markets perspective, a clear title could be clouded significantly as soon as investors start to sue. there would be a lot of lawsuits initially with the first taking of a disstressed loan and if that occurs, it is questionable whether in fact that loan could be -- that house could be sold back to its ornlal owner or
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rather the entity that bias it has to hold it. i think there are a lot of concerns on this issue. >> eminent domain is one of the most commonly used government powers. there is nothing extreme or unusual about it. we would never build a straight road if we did not have -- it is one of the most commonly used powers. everywhere in america right now. some municipality is exercising eminent domain to take something for some public purpose at fair market value and in every state in america now, there is probably a jury deliberating on what fair market value is. this is not -- this has been around far long time. the reason that eminent domain or taking as mentioned in the fifth amendment was not to give the power to government but to
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restrain the power, to make sure when government took property, it did it for public purpose and for fair and just compensation. there are procedures worked out. we do this all the time. really. this is not unusual. if you went to a munis -- municipality lawyer and said we want to do it, he would not say i've never heard of that. let me look at the law books. they do it all the time. there are procedures to take it, to start to use it and to put to the side to be determined later in litigation what the value is. it is called the quick take proceeding. we worked this stuff out. we have done it a lot. we haven't done it specifically with respect to mortgages but we have done it with all kinds of other property.
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>> i have a comment. i just want to comment on that because i totally agree, taking easement of 10 feet of property in order to widen a highway that is very different from charging whole neighborhoods to take whole areas. the history of eminent domain is one of the most distance tressing uses of public power in history. the entire infrastructure of urban renewal was based on the inappropriate use of eminent domain. it is not just in the past. the naacp testified two years ago to congress about inappropriate uses ranging from sfriss california all the way to rhode island. there is a problem in the past. there has been a problem in the past. it remains a problem today. it depends on how they are used. communities use it all the time quite appropriately. many use it inappropriately as well.
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>> any government power that has not been used unjustly when it comes to race. the homeowners loan corporation which i celebrated earlier it was one of the great trials of the new deal, which it was. it was helping white home owners and not helping african-americans. in fact, some say it began with the home owners loan corporation. they were the first ones who said we will not modify mortgages in these neighborhoods. so we will not be able to take a step further as a nation if we only exercise government powers that have over the course of our history been used justly between african-americans and latinos and whites because none have been. we are not talking about taking property here. we are not talking about taking houses to put in an elevated train or, you know, some of the things a robert moses did in new
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york and long island. we are talking about trying to preserve neighborhoods and trying to take mortgages so they can be reduced so the person who actually lives if that home can continue to live in that homened that that home is not going to sit vacant, boarded up with weeds knee-high. >> the debate really is the assumption will be that the home will be lost to foreclosure. for the last five years, the borrower has paid mortgage. they have been underwater through that whole time whether it is in san bernadino or phoenix or whatever else and to start with the asthauges forclosure will happen on that -- assumption that forclosure will happen on that home, you're assuming what will occur. >> somebody who is in a negative equity position is at far higher risk of foreclosure than someone who has equity in their home? >> far higher risk of walking away from their commitments.
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there is no question about it and that is certainly a risk factor associated with a negative equity home but it doesn't signal in any way, shape or form that, that borrower has lost the ability to pay their morning. it doesn't show they lost their job or lost a spouse or they reduced their hours. all it shows is they are simply in negative equity. it may be 10% or 50%. >> that means if that borrower has some kind of a negative income event in their life they lose their job, they have a health crisis, there's death, divorce, disability happens, they have nothing to fall back on. they cannot sell that home. they cannot borrow against that home. >> and i think that is precisely when the servicer has to step in and engage in appropriate loan modification or loss mitigation. but if a borrower loses a $200,000 job and their best opportunity for getting another job is $50,000, just as an example, it
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may not be an option for that borrower. >> is this working? i only have 100 things to comment on. [laughter] but i'm going to just pick three and the premise, the starting premise what has been characterized as m.r.p.'s program is not their program. these are programs developed by cities to protect their communities, for which we as an advisor work with that. it is very convenient for tom to call that position. i will make three general comments. there is so much to talk about. the first is the discretion between communities of color. anyone who thinks that this is not disproportionately affecting community s of color is just kidding themselves. we have managed to more or less wipe out all latino wealth in this country through this crisis. concern about eminent domain and
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for short, it has been used historically. in this case, the housing crisis has leveraged against our communities of color. i have a lot i could say about tom's analysis which was flawed in many, many ways, but the one example he wanted to call moody's, that republic tabble institution that made all of these bonsd aaa with a statement that if you adopted a program that m.r.p. recommended, we would see i think he put $300 billion there. just use logic for a second. our program calls on communities to pay the value of an underlying mortgage at fair value. if you pay fair value for something that is being carried by the way at fair value, the motion that there is a $300 million loss is very convenient. it is just flat out wrong and
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moody's has been flat out wrong many, many times. the last thing i want to say and i think it is very -- i don't want to pick a fight particularly, but maybe i do. >> go right ahead. >> this crisis was more or less brought on by tom and his colleagues. that is really what happened, not tom personly. not individually but that factory that created securitization. by the way, i just want to make a comment now, they benefit by the continuing excess payments by home owners who are underwater who continue to make pames on mortgages because whether they -- payments on mortgages because whether they think they morally should continue or whatever the reason, that is a transfer of wealth from individuals who are under pressure and underwater to the investment community. it is inappropriate given the nature but most importantly, people want to take a quick look at what's happening to foreclosed homes and look at who the largest buyer of foreclosed
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homes is becoming. it is not that first time home buyer who wants to get back into the market. it is in fact wall street. tom's colleagues. who are now buying these homes so exactly two things happen. one is returning ownership communities into tenant communities and we know what happens with the transient communities. more important, when the recovery comes, and it will, that benefit is going to rise not to the existing home owners who have been thrown out but in fact to wall street and the aggregate. >> let's give tom a chance. >> now that the curtain and has been drawn back and truly see i'm the wizard behind the curtain manipulating a $12 trillion outstanding mortgage market, i'm a little a bashed to say yeah, it is me. a couple of things. first, fair market value. the legality of imminent doe
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minute and what m.r. spmbings proposing. not a single city has developed eminent domain program. what you hear about san bernadino developing a program has been constructed by m.r.p. why do you a joint powers authority? why does a county create this construction? the simple answer is because they need to create a special purpose vehicle. follow with me here? the county of san bernadino, if they start seizing mortgages it is a congressman indicated through this "quick take." what that means is they take the mortgage and decide how much to pay later. that seeps very convenient if you go with -- seems very convenient if you go with m.r.p.'s analysis, you are only paying 70% to 80% of the appraised value of the home.
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m.r.p. builds in this discount for borrowers who are still current on their mortgage. so the joint powers authority is taking these mortgages at 70% to 80% of their value but not putting up the money. they are taking the mortgage and saying we'll pay you later and then m.r.p. through their program will then refinance those mortgages through f.h.a.'s. >> ok -- we -- >> i need to finish where i'm getting to is that through that quick take program, if it is determined later it wasn't fair market value, the joint powers authority can be bankrupted and no one wins in that situation. the pension funds and mutual fund who is didn't get fair market value now all of a sudden have had their mortgages ripped off. >> i didn't practice i'm a small town lawyer and i
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actually tried a quick take proceeding. a quick take condemn ation and in fact, the condemning authority deposits with the court, usually after they try negotiate with the property owner unsuccessfully, they deposit what they think the value is worth and then they take it and then the property owner can take that money and can still contest the evaluation and get paid more. now if they lose the valuation, they might have to pay something back, but they -- the condemning authority does have to pay something into the court to the property owner to take the property. >> just a few things. first at the risk of giving tom a heart attack, i'm going to agree with several of the things he said. he may not be able to go back to his office once i get through.
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i want to start with the point that steven is making. i believe there is knowledge this proposal of eminent domain. i think there is real potential there. i think it goes beyond the individual loans that might be purchased. what it goes into is the servicers and investors recognizing if they don't make decisions to better modify loans that someone may take the decision from them. that could be much more powerful than number of loans that are actually purchased. the community has stepped up to the plate to do that. a pushback to stephen and where i agree with tom is if we pretend, not pretend, assume that there can't be negative implications simply because a program is in place and a particular set of households are in more disstress, they are going to get more help, i think that is not a reasonable aassumption. the fact that african-americans and lat
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ian:os need something more does not mean when the program is designed it will benefit them more. the borrowers have to be current in their mortgages. one might expect it was in african-american and latino communities that a disproportionate amount of lats ianos may be behind. there on its surface, we would bonal given the real benefits to individuals from tom's point who need it from a policy standpoint but are not in immediate disstress and not giving that support to the house holds that need it. that says to me the program deserves a second look. i think there is real only in the eminent domain purpose in this particular case, but i think if we walk into it assuming that the households that need it most are going to benefit the most, then we can have every sort and manner of
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unfair and quail outcome. another thing i agree with tom as well, you won't be able to go back to your office. is the fact that you could have full neighborhoods targeted in which the house prices are substantially upside down. there is a two step os to this process. one is the loan is purchased and second it is sold back to the original owner. what guarantees that loan is will be sold back to the ornlal owner? -- original owner? if it turns out for some reason people of delor -- -- color. >> to clarify, no >> no home is bought, no loan is sold back. one of the problems that we have is everyone assumes they know everything about what the program is. i don't know. i'll say this again. we work with communities to design programs that fit their needs. that address the issues of is this current home owners or delinquent homeowners?
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is it all home owners? is it some home owners? what do you want to do? do you want people to prequalify or qualify afterwards snsm we will lay out to you all the options that you have and you as a community to make sure some of these very issues get dealt with and figure out how do you bring this out to the community to eliminate many of the pitfalls there. this is not a one size fits all. this is individually designed by those communities. this won't surprise you. the communities that we are most -- on in they see conversations are the most heavily minority communities in this country. that is the logic of the conversation. >> a quick point about how bad foreclosure crisis and collapse of home values have been for communities of color. there are lots of studies on the effect of loss of net worth, household net worth. they have done one that has been
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published in the last couple of weeks. there was an n.y.u. economic study within the last couple of weeks. a lot of the loss of value is actually in the neighborhood where there are forclosures. it is having a home on your block or the next block that is vacant and boarded up and the weeds are growing. and that, you know, there is also all the foreclosures that are flooding housing markets generally, but specifically, a great deal of that, of the loss of value has because of foreclosures in neighborhoods. that has affected latino neighborhoods and african-american neighborhoods disproportionately by an enormous margin. n.y.u. found that the median household had lost 46% of their thet worth, their life -- net worth, their life savings in the housing crisis, the last five
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years. that is a stunning number. that takes us to the lowest number since 1969. we are really a different nation now than we were five years ago because of the loss -- there as has been a lot of discussion about income inequality and wealth is worse than income and equality. the loss is much greater in african-american and latino communities but in low-income neighborhood where is people dead own their homes, but there have been many forclosures, the average loss of net household worth has been 91%. >> i agree with both jim and congressman miller, that we do need to target the borrowers in need. that's the key point of all of this debate. find the borrowers who are challenged paying their mortgages.
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don't come up with a program and address folks who are not having difficulties paying their mortgage. let me pull the curtain back just a little bit on what he is saying about the m.r.p. program designed to meet the meeds of the community. if that was true, m.r.p. in my opinion should be registered as a not for profit institution, but instead they are not. they are registered with the securities and exchange commission. their incentive and profit moat sieve to make money. that is -- motive is to make money. designing a program to meet the needs of the community. which is why their program has been designed to take borrowers who are current in their loans. of course those are the most valuable loans. they are the chery picking of the loans. the borrowers who can pay their loans. go find borrower with the highest fico score bu but
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because they are under water, we will refinance them, redo them and now all of a sudden now you have a very profitable loan, m.r.p. in our own program document proposed to sell back to f.h.a. to make a fant profit. if their program works and they are paying fair market value, how do they pay their investors 20% to 30%? >> just to circle back, you know, whether m.r.p. makes money or is a nonprofit, there are 30 some municipalities looking at doing some version of this right now. this is these -- these munis palts are hurting. -- municipalities are hurting. i want to ask this publicly.
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would you support changing bankruptcy code to prevent -- because if you say no to everything -- >> i propose doing this -- there are actually a lot of proposals doing this. a law professor at harvard wrote a piece, an op-ed in "christian science monitor" in december of 2008 or so. ncrc proposed doing this and i wrote an article in "new republican" in march of 2010 suggesting that treasury could use tarp funds and act exactly the homeowners loan corporation had done and not do this as a profit but as a way to help home owners. >> a real quick point on just clarify my position. i'm not opposed to the in concept the use of
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eminent domain for borrowers who are upsidedown, who are current. i'm simply saying that the priority would be in my view for those who are already experiencing financial disstress. when you get to those who are current there are other tests that can be put in place. there needs to be a lot more detail on the table before there is a vote of yes or no. for example, if you're paying 70% of your income to keep that mortgage current do you want to force the homeowner to go into default and wreck their credit score and in the process of doing that can't buy clothes, food, etc.? i think there are parameters that can be in place that prioritize in need. in need to me is not just a cutoff between i'm paying today. i'm not paying yesterday. >> can i just -- since the
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curtain keeps coming back. i just want to say one or two things to make sure people have the facts in front of them, that's all. m.r.p. is a for profit institution. that's how problems often get solved by american entrepreneurship. we're not a pool of capital. we charge a fee. we charge a community $4,500 if we successfully help them keep their homeowner in their home. we have all of our costs associated -- that is a funny number. where did we get that number from? we looked around and it turns out that our federal government will pay that to a servicer to modify a loan that has no risk at all. we chose that number. we said the federal government has already done that and that is the deal. we'll charge it when a homeowner stays in their home.
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there is a refinancing activity that has to take place. you have to basically if a community is going to condemn a loan, it has to pay for the loan, unlike get it for nothing which the congressman corrected. it is not exactly true. you have to put up the money in advance. turns out we have to raise that money. surprise, we're raising it from wall street. where else would you get that money? that is where it comes from. probably people who are members of efsf. they need to be given the return. we don't promise them anything. we say this is the program. we need to have your capital to be able to exercise this. what return will it require to get you to lend us the money? lend the community the money? that's where it comes from. the fact of what happens here, i don't mind of being accused of being a cap -- cap thrist. >> i can't believe we're going to start and end this together.
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i agree for people to put up capital they have to feel like they are going to get an appropriate return. if you start changing rules and go in after they put up the cal tal and say we have -- capital, and say we have never gone through any program to take individual mortgages, we're going to take it at what the court sthiss fair market value, which from your proposals every investor will agree, we're going to take that money away and decide what is best for them. we're going to decide where we think and what should happen with those mortgages and in the process, we're going to start to get into a debate of what to do with fannie and freddie who guarantee 90-plus% of every mortgage made in america. we're not going to be able to get the taxpayer off the hook of paying those mortgages. the government just came in and
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took these mortgages that we don't think are fair market value but now you're asking for more capital to originate more mortgages. i think it is it is illogical. we were doing the exact wrong things to scare investors away. i want to make this pricing argument. are we going the agree on what fair market value is? i'll take fannie mae's numbers. i'll use the government's numbers of the value of mortgages. that's what we told people we were going to do. it is not some kind magic. it is the exact numbers that fannie mae tells you these mortgages are worth. again, we'll get there. the court has to go through that. but that is the proposal. >> i do want to go out to the audience since all of these folks have actually come here in person, i want to give folks a chance to ask questions. i have a few more too.
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but we'll try to take turns here. so -- and please identify yourself. >> my name is bill reagan. i'm an organizer with the union. in response to come we can change the rules. i like to point you all changed the rules. we build a you out to save the economy. you just kept going on like always. not keeping up your part. we build a you out not to bail -- bailed you autonot to bail you out but to save home owners. we would like to change the rules a little bit to benefit us and suddenly that is problematic. i don't buy that. i think we need to start these issues in a lot of places because unless we do that, nothing is going to happen for us. thank you. >> question?
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>> william keeper, mortgage bankers association. -- cooper. i would like you to expand about f.h.a. and the long-term consequences on the securities market if this goes forward. >> two issues. the first one -- what i think the crew has focused on is going after private label mortgage-backed securities. what would happen if they go after f.h.a. loans? most originate around a 3% down payment. when you talk about underwater mortgages, the number one person who should be focused on this in the world is the recently concerned -- who has a big pile of underwater mortgages with
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f.h.a. should we use that to go after fannie mae and f.h.a. loans? second, i think your second question here is who would be the long term implications to the securities market? try telling a chinese investor who is -- wants to put a lot of capital to work in the united states. pile on that lots of news characterizations of the united states government coming in and taking mortgages, taking their property and fixing them so that the m.r.p. is designed for the community need rather than the person who put the capital up. that is long-term distrouppings the markets. -- disruptions to the markets. it makes it more impossible than it already is. >> the argument that at some point in the future we may do this again, and we have never
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done in this the past, now we say we'll do it again, makes no sense at all to me. the reason we have never done it in the past is we have never had a foreclosure crisis like this. i don't think there is a lot of temptation for municipalities to do this absent a foreclosure crisis. why would you do this unless you really had a problem with declining home values and a cycle of foreclosures and that is like someone in the emergency room saying he was in cardiac arrest but i didn't want to use a defibrillator because in a few months he would come back and say did he shock my chest again? there is not a reason to do it unless we have circumstances like the ones that we have got. >> just one thing, don't worry
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about p.l.s. we should look elsewhere. it's not even clear you could use eminent domain to loans that had fha guaranteed you. the issue is for local communities to take federal property. the threat, the big uh-oh, what would happen? it is not clear if the community would choose to do so, that that would be legal. >> i agree with you. it is for local communities to take federal property, you're indicating is potentially illegal. i 100% agree with you. private label securities, 10% are owned by fannie and freddie, which the fhsa is the conserve or the for fannie and freddie. you're taking federal government property which they have publicly already indicated they are very concerned about this and potentially may have to step in legally if you start taking
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federal property and interfere with their conservatorship powers. >> i don't think it is all or nothing. fact of the matter is, they the develop a net present value calculations has been run off throughout the foreclosure crisis if the loans are identified turned eminent domain program that show a net value beneficial to the investor and homeowner. those were the only loans selected for the program and that could be explained to any investor showing that you're not losing money, you're actually gaining money. this is what happens when you don't do what you should be doing. you end up with a lot of lawsuits. i believe there are ways the program could work in which the securities market would not be impacted at all and investors would say net present value, i understand that. that makes sense. the challenge goes into the details of how the program is structured. >> we have some more questions here. yes?
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>> my compliments to c.a.p. and julie for putting together this panel. just one statement before ask my question. there are many investors including a.m.i. members. they support bankruptcy shared down depreciation and other solutions for borrows. i was surprised by some of the comments. can you reiterate how something like this proposal impacts millions of seniors and what are some of the unforseen consequences? what sounds tempting and worth while but may need to be better understood by communs before they proceed because while we're helping a few, it may have an impact on many americans. >> i think that was really an
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outstanding question because you put your finger on the issue of seniors. and seniors to me represent the population that could potentially benefit from this program and be current in their mortgage but being current in their mortgage makes no sense if they are already 70 years old and they have the possibility of never paying off that loan. adjusting their principal might be a reasonable thing to do. the details to me are where this eminent domain conversation should be. >> chris' question about seniors and unions is because they have an interest as homeowners potentially in trouble but also the pension holders or, pension funds so steven and thomas, you want to -- >> steven took a shot earlier at the securitization process. describe securitization at the simplest point is older americans, let's call them retiring police
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officers who have pension money through their 401 k's. that money gets invested somewhere. usually the mortgage-backed securities. when you buy a mortgage-backed security, you allow a lender to take that money and give it to someone else. effectively, you're taking money from lending to the elder communities or people who have savings and you're lending that ultimately to people who want to buy a house. the problem with eminent domain proposals, you're effectively saying for those who put money out there, who lent this money through their pension funds or 401 k's or mutual fund, you're saying i want to help that homeowner and do it at the expense of these pension funds. that is wrong when you're using the police power and the government. >> if i might, a slightly different interpretation. first of all, many of these union members are, in fact, the very people who
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find themselves under water. that's who it really is. in many cases. so we'll use the example, i'm with tom so that the pension fund fund, however that pension fund, you talk to the trustees they want to maximize the value but think about the constituents. now we have a devastating problem holding back our economic recovery and holding back construction jobs an now you a community that says we're willing to pay fair value for these mortgages. by the way, you own a bond that has part of a trust that has got 100 mortgages and maybe there is one or two and we'll pay you fair value as determined by the government for us that can turn that mortgage into cash and that allows us to keep that union member in their home to renegotiate with them. that's why the pension fund, in my opinion, should be enthusiastic about this and should tell their bond managers
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the blackrocks and pim coast of the world, this is good for america and good for my return. rrs i was going to say it from the perspective of the investor side again, if you're using net present value then fact it's a net positive. >> it's true mortgage investors have allies on a lot of issues, which is why greece did so much but got this one wrong. i think working families benefit in a couple of ways in that they are home owners. the collapse in home values is affecting their net worth and life savings and in a dramatic way as we discussed earlier. second, they care about jobs. they are affected by the jobs crisis. a big part of the jobs crisis has been the effect on consumer demand from the loss of net worth and finally as unions hold
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pension funds, if they are paid fair market value, that is not hurting them. that's what fair market value means. it means they are selling something or they are having a forced sale of something but they are not getting hurt. it should not hurt pension funds. i understand the concern that investors don't think they can count on, with some justification, don't think they can count on trustees and servicers to protect their interests and to advocate for fair market value with enthusiasm at the local level when it is challenged, when there is a condemnation and the it is coming out of oir portfolio anyway, they don't care. the money goes straight to the investors. they don't care. they flow the towel quickly. i understand that -- throw in the towel quickly. i understand that concern. i don't know how the fix it but
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i would encourage steve and the other groups like his that are considering something like this. he is up here. his is not the only proposal like this. they work with you to try to make sure there is some way to reassure you that you are getting paid fair market value for the mortgages that are taken from the securitization. >> let me see if i can get an ally on the panel here or try to anyway or at least have a heart attack. do you think it is possible, appropriate for investors to trust that the government and court also get fair market value right for hundreds of billions of dollars? >> i think the reality is it goes into the details of how the program is designed. my concern is and steven has
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alluded to this. you don't really understand how the program is designed. but to me that is not my problem. that is the problem. the program's design is where the rubber meets the road and if it is known a way it can be demonstrated but the only loans that would be eligible for purchase by a municipality, to me that is a different conversation than one that leaves this door open for the buying of loans where a individual is upside down and there is no other parameter except they are underwater. >> i want to get another question. >> fair market value is such a common legal concept in every corner of america now. juries are deliberating over fair market value. there are patterned jury instructions. there are ways to prove it. there are comparable sales.
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there is valuation based upon income that it produces. this is not some strange concept. >> if you take the numbers that steven put up here. >> you don't have to take the numbers -- you have an economist who says this is my calculation and why, i'm sure it would bed a missable. -- admissible. produce evidence of comparable sales and income and everything else that goes into proving value. >> what steven has done here today is say take these number numbers. this is what the government tells you is the real value of these mortgages. if you look at the price of outstanding private label security, they would depreciate 28% in this time. they have appreciated 28% since then. does that sound like a good deal? deal? >>


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